If the rush to sell continues, it could ultimately lead to lower imports into major markets, potentially tempering gold’s rally, retailers and industry experts said.
Spot gold topped $3,000 an ounce for the first time on March 14, and continued climbing last week to bring year-to-date gains to more than 15%, driven by a powerful combination of political and financial uncertainty.
The stunning run higher follows an almost 30% rise in 2024, and has driven increased business for often-overlooked scrap gold buyers in Zaveri Bazaar, India’s largest bullion market.
Textile trader Unmesh Patel said he had made a return of more than 25% selling four 10-gram gold coins bought less than seven months ago after the Indian government cut import duties on the metal.
“I just decided to sell instead of waiting for prices to go up even more,” he said.
Domestic gold prices in India have risen more than 32% since it cut import duties in July, to a record high of 89,796 rupees per 10 grams.
“If prices stay this high all year, India’s overall demand could drop by more than 30% in 2025,” said Prithviraj Kothari, president of the India Bullion and Jewellers Association (IBJA).
“Buyers are finding it hard to keep up with the price surge, and their budgets aren’t growing either,” he added.
Wedding season slump
Although India’s wedding season is in full swing, jewellers are seeing less than half their typical customer traffic, according to dealers.
Even those who are making purchases, such as bride-to-be Vaishnavi M., are opting to exchange old jewellery for new to minimise costs.
“The rates are so high that it would completely mess with my wedding budget…the plan is to exchange some of my mother’s old jewellery,” said Vaishnavi M. in the southern state of Kerala.
India’s scrap gold supply totalled 114.3 tons last year, a figure the World Gold Council forecasts will increase in 2025.
India fulfils the majority of its gold requirement through imports, while China, the biggest consumer, also meets two-thirds of demand via imports.
Jewellery hubs in the Middle East are seeing a similar dip in demand, according to a Dubai-based bullion dealer.
“A lot of Indian tourists usually shop in Dubai to avoid import taxes, but even they’re holding back,” the dealer said.
About 60% of gold demand in the UAE is for jewellery and when the prices are high, consumers purchase lower-weight products, said Andrew Naylor, Head of Middle East and Public Policy, World Gold Council.
“However, our data shows that the value of jewellery bought last year increased, despite lower volumes,” he said.
In China, the lacklustre retail purchasing seen in 2024 is continuing. With jewellers charging extra premiums for craftsmanship, people who just want to hold some physical gold will buy coins and bars, said Peter Fung, head of dealing at Wing Fung Precious Metals.
Other major Asian markets have also seen a slump in demand for gold jewellery, with more sellers than buyers.
Consumers are shifting towards cheaper jewellery or opting to sell their existing gold or use it as loan collateral rather than making new purchases.
Brian Lan, managing director at GoldSilver Central based in Singapore, said close to five shops had recently opened around Chinatown selling gold-plated silver.
“We have seen some clients who go home and look for jewellery that they don’t wear, or is broken, and bring it back to liquidate it,” Lan added.
These trends highlight the delicate balance between gold’s role as a traditional cultural commodity and its value as a financial asset.
Looking ahead, analysts say the outlook for jewellery demand remains gloomy, although investment demand for bullion is likely to remain strong.
